{"id":3005,"date":"2010-06-08T11:51:17","date_gmt":"2010-06-08T11:51:17","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=3005"},"modified":"2025-03-27T15:49:03","modified_gmt":"2025-03-27T15:49:03","slug":"dow-six-bear-comparison-further-update","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=3005","title":{"rendered":"Dow six-bear comparison: further update"},"content":{"rendered":"<p>A prior <a href=\"http:\/\/www.moneymovesmarkets.com\/journal\/2010\/5\/19\/us-stocks-converge-with-six-bear-average.html\">post<\/a> presented a comparison of the rebound in the Dow Industrials index from its trough in March 2009 with recoveries after the six largest twentieth-century bear markets, excluding the devastating 1929-32 decline. These bears involved index falls of 45-52%, similar to the 54% drop over October 2007-March 2009. (Prices slumped by 89% over September 1929-July 1932.) <\/p>\n<p>At the time of the earlier post, the Dow had moved down to converge with the &#8220;six-bear average&#8221; of these earlier recoveries. With liquidity conditions for markets having deteriorated, a fall into the lower half of the historical range seemed likely in the short term, although a significant undershoot of the average might present a buying opportunity.<\/p>\n<p>Updating the analysis, yesterday&#8217;s Dow close was 8% below the six-bear mean and 1% above the bottom of the historical range &ndash; see chart.<\/p>\n<p>Examining the six components, the recovery since March 2009 bears the strongest resemblance to the rebound after the January 1906-November 1907 decline. The Dow was mostly above the six-bear average during the early stages of this revival but a significant correction set in after about a year, echoing recent market weakness.<\/p>\n<p>Like the recent bear, the January 1906-November 1907 decline was associated with a credit bust and financial panic that drained liquidity from markets. Both crises climaxed with the failure of a major bank &ndash; the Knickerbocker Trust Company in October 1907, Lehman Brothers in September 2008 &ndash; and a subsequent decisive &#8220;official&#8221; rescue effort (co-ordinated by J P Morgan in 1907, before the institution of the Federal Reserve). The economic consequences were similar, with a severe one-year recession in industrial output followed by a strong rebound.<\/p>\n<p>Relative to the bear-market trough, the Dow is currently very close to its level at the same stage of the post-November-1907 recovery &ndash; see chart. On that occasion, prices were reaching a low and rallied by more than 20% over the following six months. <\/p>\n<p>The &#8220;six-bear&#8221; evidence, therefore, suggests that market weakness will abate. Resumption of an uptrend, however, requires an improvement in liquidity indicators.<\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"\/storage\/graphs\/dow-ind-080610.gif?__SQUARESPACE_CACHEVERSION=1275998790944\" alt=\"\" \/><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A prior post presented a comparison of the rebound in the Dow Industrials index from its trough in March 2009 with recoveries after the six largest twentieth-century bear markets, excluding the devastating 1929-32 decline. These bears involved index falls of 45-52%, similar to the 54% drop over October 2007-March 2009. (Prices slumped by 89% over [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-3005","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3005","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3005"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3005\/revisions"}],"predecessor-version":[{"id":5314,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3005\/revisions\/5314"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3005"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3005"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3005"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}